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Predictions Point to PS3 Creating Losses

Merril Lynch Japan is predicting that Sony will be losing over $1 billion in the PS3's first year.

According to a report on Gamespot.com, predictions are pointing to a $100 loss for every PlayStation 3 sold.

Citing a prediction made by Merrill Lynch Japan Securities, the PS3 will cost about $494 per unit, while the system will be sold for $399. Merrill Lynch Japan says that the main the Cell chip, RSX and BD-ROM drive -- the main components of the machine -- will cost approximately $100. The rest of the machines components will take up the remainder of the cost.

Due to the fact that the Microsoft Xbox 360 will be competing against Sony, Merrill Lynch Japan is assuming that Sony will be selling its new system well below the production cost, with a price tag of about $410 in Japan and $399 in the North American market.
The report also quotes Sony Computer Entertainment president Ken Kutaragi, who talked about the PS3's pricing. "Whether consumers think a product is expensive or cheap all depends on the balance between its appeal and price. Our ideal [for the PS3] is for consumers to think to themselves 'OK, I'll work more hours and buy it.' We want people to feel that they want it, no matter what."

"When Nintendo was selling its 16-bit machine at around 12,500 yen ($114), we sold the first PlayStation at 39,800 yen ($364)," continued Kutaragi. "The press was saying that it was expensive, but it was a huge hit. It's the same thing with the PlayStation Portable from last year. The Game Boy Advance is a same handheld gaming machine, and it costs less than 10 thousand yen ($91). On the other hand, our PSP had cost 25,000 yen ($229). But people lined up overnight to buy it, and it sold out on the day of its launch. It all depends on whether people want it. Of course, I'm confident that the PS3 is a product that people will definitely want."